It’s only going to get duller from here as we head into 3rd quarter earnings season blackout. With the trade war on hold until October and most insiders blacked out from buying pre-earnings release, there won’t be much to be learned from the insiders’ tea leaves. After the most buying all year, the market responded by rallying sharply. Now insiders have retreated with few exceptions.  They are Coty, the giant cosmetics company controlled by European investment firm JAB Ltd. Coty has struggled with weak sales and executive turnover. On July 19th, the company said it will restructure its operations and cut jobs to ease indigestion from brands Coty bought in 2016 from Procter & Gamble Co. At these levels I expect JAB to buy the remaining shares from the public in a go-private transaction.

Staying on the beauty train, Sally Beauty has been the ugly girl at the beauty parade for years.  At some price, any stock can look beautiful.  Tell that to Ulta shareholders who watched the company shed $100 in price one day on weaker earnings than expected.

Massive buys in apparel company, PVH, caused a quick 5% bump in the stock prices.  We are keeping an eye on this one.  Calvin Klein, Tommy Hilfinger and traditional brands are losing panache to internet upstarts with massive social media followings. Can this giant pivot?

Company Mkt Val Insider Relation Type Shares Price Ending % Chng
New Media Investment Group Inc  $2,457,200
Prospect Capital Corp  $894,414 Barry John F III Chmn Purchase 139,761  $6.40 39,648,656 0.4%
PVH Corp  $9,985,746 Chirico Emanuel Chmn Purchase 133,155  $74.99 426,778 45.3%
Sally Beauty Holdings Inc  $494,554 Miller John A Dir Purchase 40,500  $12.21 249,379 19.4%
Agilysys Inc  $251,300 Srinivasan Ramesh CEO Purchase 10,000  $25.13 225,348 4.6%
Coty Inc  $13,281,936
Eldorado Resorts Inc  $369,000 Pegram Michael E Dir Purchase 10,000  $36.90 124,834 8.7%
Prospect Capital Corp  $1,288,456 Barry John F III Chmn Purchase 201,548  $6.39 39,850,204 0.5%
US Xpress Enterprises Inc  $309,328 Fuller Max L Chmn Purchase 71,915  $4.30 786,187 10.1%
Cott Corp  $1,004,944 Harrington Thomas CEO Purchase 80,000  $12.56 257,413 45.1%
L3Harris Technologies Inc  $209,190 Dattilo Thomas A Dir Purchase 1,000  $209.19 2,000 100.0%
Lannett Company Inc  $245,500 LePore Patrick G Dir Purchase 25,000  $9.82 201,340 14.2%
Liberty Latin America Ltd  $1,057,037 Zinterhofer Eric Louis Dir Purchase 65,000  $16.26 10,894,608 0.6%
PennantPark Floating Rate Capital Ltd  $285,408 Katz Samuel L Dir Purchase 25,000  $11.42 192,100 15.0%
Prospect Capital Corp  $1,508,180 Barry John F III Chmn Purchase 237,857  $6.34 40,088,061 0.6%
Sprott Focus Trust Inc  $266,448 George William Whitney Dir/>10% Own Purchase 39,985  $6.66 10,353,570 0.4%
Timkensteel Corp  $211,576 Timken Ward Jackson Jr Chmn Purchase 40,000  $5.29 461,524 9.5%
Yext Inc  $1,402,326 Walrath Michael Chmn Purchase 85,429  $16.42 2,325,062 3.8%
Emmaus Life Sciences Inc  $205,702 Zen Wei Peu Dir Purchase 52,892  $3.89 2,950,858 1.8%
Esperion Therapeutics Inc  $259,106 Mayleben Timothy M CEO Purchase 7,500  $34.55 78,663 10.5%
Gulf Resources Inc  $476,387 Yang Ming Chmn Purchase 661,648  $0.72 3,173,848 26.3%
PVH Corp  $502,293 Nasella Henry J Dir Purchase 6,250  $80.37 31,299 25.0%
Sarepta Therapeutics Inc  $219,950 Behrens M Kathleen Chmn Purchase 2,500  $87.98 135,667 1.9%
US Auto Parts Network Inc  $200,806 Kanen David Dir/>10% Own Purchase 139,120  $1.44 5,140,933 2.8%

Insiders sell stock for many reasons but they generally buy for just one – to make money. THE INSIDERS FUND invests in companies at or near prices that management has been willing to invest significant amounts of their own money in.  After all, who knows a business better than the people running it?  You’ve always heard the best information is inside information.  This is as close to “insider information” that an ordinary investor is likely to see- and it’s entirely legal.  Officers, directors, and 10% owners are required to inform the public through a Form 4 Filing any transaction, buy, sell, exercise, or any other with 48 hours of doing so. This info is available for free from the SEC’s Web site, Edgar, although we subscribe to the Washington Service as they provide a way to manage and make sense of the vast realms of data.

As a rule, we only look at material amounts of money, $200 thousand or more, as anything less could just be window dressing. The bar is different from selling because the natural state of management is to be sellers. This is because most companies provide significant amounts of management compensation packages as stock. Therefore, with selling, we analyze for unusual patterns, such as insiders selling 25 percent or more of their holdings or multiple insiders selling near 52-week lows. Another red flag is large planned sale programs that start without warning. Unfortunately, the public information disclosure requirements about these programs referred to as Rule 10b5-1 is horrendously poor.  I also generally ignore 10 percent shareholders as they tend to be OPM (other people’s money) and perhaps not the smart money we are trying to read the tea leaves on.

Of course, unintuitive as it may seem, insiders can also be wrong about their Company’s prospects, they can easily be wrong about how much others will value them, and in many cases, maybe most cases have no more idea what the future may hold than  you or I. In short, you can lose money following them.  We have and we curse aloud, what were they thinking!  Needless to say, past good fortune is no guarantee of future success.  We may own positions, long or short, in any of these names and are under no obligation to disclose that. We welcome your comments on our analysis.

This blog is solely for educational purposes and the author’s own amusement.  Investing with The Insiders Fund is for qualified investors and by Prospectus only. Nothing herein should be construed otherwise.  To learn more about our strategy, visit our website.

If you would like to hear more about how you can get involved with the Insiders Fund, please schedule some time on my calendar

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